EU roaming rules spur end-user adoption, but fail to include data charges

Editor’s Note: This article originally appeared in our September Special Edition, Behind the Scenes, a focus on integrated subscriber and network management systems. To download the complete Special Edition, click here.
In an increasingly global world where international business travel has become commonplace, many have found culture shock replaced by the often more painful phenomenon of bill shock as users’ cross-country phone bills swell out of all proportion owing to exorbitant carrier roaming charges.
Europe, with its numerous different countries and borders, has had to make the slashing of roaming charges something of a priority over recent years for the good of both business and tourism, but the U.S. – where mobile plans are nationwide – and Asia have not seen the need, much to the chagrin of the international traveler.
“In Asia, roaming is absolutely out of control for both data and voice,” Motricity’s Oliver Graves told RCR Wireless News. “Here, I am not sure what is being done to drive costs down. I get the feeling that operators don’t mind it when my bill is $1,200 even though I have paid for packages and plans to give me discounts on voice and data roaming.”
“Data roaming prices were often set at levels which discouraged people from using their mobile phones when travelling abroad,” European Commission spokesman Jonathan Todd told RCR Wireless News when we asked why the issue was so important on the continent.
It wasn’t just the high prices, said the commission, but also the lack of information about consumed data roaming volumes, which ultimately led to ‘bill shock’ for most consumers and prompted the EC into taking a radically proactive role in tackling the problem with specific, European-wide directives.
“The commission took action to address the high voice roaming charges paid by consumers for using their mobile phones when travelling abroad in another EU member state, which remained a barrier to the single market,” Todd explained. He went on to say that national telecom regulators had asked the EU to intervene because they were unable to tackle the problem of excessive roaming prices, which ultimately hindered citizens’ use of these important cross-border services.
“Allowing the consumer to choose cut-off limits provides an effective tool for dealing with bill shock,” Todd said, alluding to the amended Roaming Regulation directives that originally were approved in 2007 in order to increase transparency of tariffs and protect consumers from unexpectedly high bills, or “the roaming rip-off” as Brussels dubbed it.
The Roaming Regulation, as its name implies, sets maximum limits on international roaming rates within the EU and regulates both wholesale and retail roaming charges for European operators.
Price caps set
For example, at wholesale level –the maximum price the visited network operator can charge from the visiting network – specific caps are set for calls, SMS and data roaming, while at retail level, maximum prices are defined for phone calls and SMSes made and received.
These new regulated prices – or “Eurotariffs” – have been introduced gradually, presumably so as not to gall operators too much.
What does this mean in terms of real money? Well, as of July 1, the price cap at the wholesale level for roaming calls was set at €0.22. For SMSes, the wholesale cap was set at €0.04 and for data roaming, €0.80.
At the retail level, a maximum price cap for the Eurotariff – which all operators are required to offer by law – applies by default to all customers unless they have explicitly requested another tariff.
These maximum caps were set to €0.39 for outgoing calls and €0.15 for calls received, while sending an SMS was capped at €0.11 and receiving an SMS is now free of charge. Data roaming prices, however, are still not regulated at retail level.
While operators are obliged to offer a Eurotariff, they do, however, remain free to provide alternative retail offers for voice roaming services if they want to be extra competitive.
The EC believes that, so far, the regulation has been pretty successful in providing consumer protection, as mobile users across Europe are now benefiting from reductions in prices not only for voice, but SMS too, as well as the added benefits of increased transparency.
It’s still not enough for the commission, however, which said that prices for data roaming were still too high and that consumers were not yet fully enjoying the reductions seen at wholesale level.
“So far, competition in the roaming markets has not developed sufficiently and structural problems persist,” said Todd.
Operators, for their part, have squealed and squirmed under Brussels’ mandate, saying the directives are unfair and actually stifle competition. Critics also say it was not the EC’s place to interfere with private telecom companies.
The EC, however, politely disagrees.
“First of all, the regulation was considered necessary since competition in the roaming market did not work and resulted in excessive prices,” Todd told us. The main objectives of the Roaming Regulation, we were told, was to explicitly “promote competition, consolidate the single market and ensure that consumers do not pay unjustifiably high prices compared to domestic charges when crossing borders.”
The commission also argues that it deliberately set price caps at levels which would allow competition to further develop below the regulated maximum prices, thereby providing conditions for competition to flourish.
Indeed, not only are the conditions there, but the commission says it “expects operators to take this opportunity to develop competitive roaming offers.”
Operators, however, have argued that users will take advantage of the caps for unfair usage, something the EC dismisses offhand.
“There is no risk of customers taking advantage of “capped rates,” since services according to the Roaming Regulation are invoiced according to usage and independently of a call plan a customer may or may not have,” said Todd. Indeed, call plans, although increasing, are still less common in Europe than in the U.S.
Therefore, for instance, a customer who sends 100 roamed text messages pays 100 x €0.11 (or 11 Euros + VAT), while a customer who only sends one text message pays €0.11 + VAT – assuming that the provider charges the maximum amount permitted by the Roaming Regulation.
So, despite the complaints by mobile service providers, overall the EC says implementation of the amending Roaming Regulation has gone smoothly and operators have generally complied with the requirements.
Regulations expire in 2012
The current regulation expires at the end of 2012, but requires the commission review it by no later than June 30, 2011, at which time the EC will need to assess whether it feels competition has developed sufficiently, whether consumers are sufficiently protected.
Based on the outcomes of this review, the EC will then decide whether further regulation of roaming services will still be necessary, either in the form of price regulation or some alternative long-term approach. The other option is to allow the regulation to expire in 2012, leaving roaming services to market forces alone.
Despite the EC’s example, however, other regions like North America and Asia have been reluctant to follow Europe’s lead and the commission says it will not be pushing its agenda internationally beyond Europe’s borders.
“The commission follows the development of roaming prices and services in different countries, but it should be emphasized that the Roaming Regulation is a single market instrument which tackles barriers to the EU’s internal
market and can thus only address such charges for roaming within the EU
and not for roaming outside of the EU,” Todd said. He added, however, that he hoped operators outside the EU could be encouraged to agree to a commercial basis on rates for the good of competition and consumers.
EU strategy bleeds beyond its borders
Nevertheless, some in the telco industry are already seeing the EC’s influence spread outside of Europe. For example, Lori Lichtblau, mar-com and PR manager at Starhome, a firm specializing in roaming solutions, noted that EU regulation activity on data roaming charges has had a definite effect on other regions.
Starhome says that according to what it has been hearing from operators, the caps and transparency now being offered to subscribers in Europe are paying off and they are experiencing increases in data roaming usage.
First, said Lichtblau, it was the awareness of bill shock, with articles being published in the media across all regions, and recently some operators in APAC have started offering flat-fee plans – a fixed price for unlimited usage, while others have started cutting prices or offering special rates between certain countries.
“We have been approached by governing bodies from Australia/New Zealand regarding this issue, as they were gathering information about available solutions and the cost benefit of regulation,” she said..
In the Middle East, too, operators are cutting prices and the Gulf States have already approved caps.
In South America, there is even more awareness about bill shock and some operators are now sending informational SMSes to their subscribers regarding their usage and costs.
In North America, however, despite the odd article bemoaning bill shock, Lichtblau said it doesn’t look like operators plan to do anything to make roaming cheaper, although the Federal Communications Commission is said to be looking into the issue and consumers have been invited to comment. “It is probably only a matter of time before there is action taken in the USA,” asserted Lichtblau.
Regulation EC style is not necessarily the only way, however, and Starhome said it has been seeing “several new trends” in the roaming industry that will affect how operators choose to remain competitive while improving prices for subscribers. Starhome plans to address many of these issues at its annual Roaming Forum on Oct. 6 in Antwerp, Belgium.
Operators, said Lichtblau, are specifically looking for new ways to preserve their revenues and are having to think outside of the box and be more creative in order to differentiate themselves from the competition.
“Price per minute and first-to-market for services are no longer sufficient,” she explained, noting that carriers were having to get more creative and flexible with pricing bundles, as well as cross-selling and up-selling in order to increase customer loyalty and stickiness.
“There is an increase in creative targeting, communication, and segmentation with regards to promotions,” she continued, also pointing out that new tools such as Smarthome’s own SPARX – which enables an advanced level of communication and promotion to outbound roamers – had recently become available.
Lichtblau added that operators are increasingly turning to outsourcing to increase revenues and reduce capex and opex by maintaining a high quality of service, while significantly decreasing overhead costs.
“We are certainly seeing more demand for hosted, managed service and centralized services,” she declared.